The Budget for 2022 in Ireland was presented today, 12th October 2021, in starkly different circumstances to this time last year, with over 90% of the adult population now fully vaccinated from COVID 19. However, uncertainties still remain with respect to a potential resurgence of COVID 19, and with respect to the Brexit process.
The recently published “Estimates of Receipts and Expenditure” showed an outperformance in terms of tax revenue collections in 2021 and that the State finances are in a generally more positive position now than was forecast at the start of the year. The economy has grown strongly in the second and third quarters of 2021 resulting in a drop in the projected State deficits for 2021 and 2022 from €34.5bn in each year down to €21.5bn for each year. Recent inflationary pressures are also noted, with the rate of inflation to September expected to finish at 3.7% – the highest level since 2008.
In terms of its impact on the Exchequer, the most significant tax changes announced were a €1,500 increase to the lower rate Income Tax band, and an increase of €50 in tax credits available to each individual and to each worker. These measures are projected to result in a €520m reduction to tax revenues for the State in 2022, and to combine to achieve an increase to individuals’ net take home amounting to a maximum of €400 per annum.
For SMEs, welcome extensions were announced to both the Employment and Investment Incentive (EII) Scheme and the CT exemption for new companies.
Some clarity was provided in relation to the planned phasing out/cessation of the Employment Wage Subsidy Scheme, (EWSS), and the Pandemic Unemployment Payment, (PUP). A detailed plan to taper out these extraordinary supports to businesses and workers affected by the pandemic was set out, with all subsidies under these schemes intended to conclude next year at the end of April (EWSS) and February (PUP).
For SMEs, welcome extensions were announced to both the Employment and Investment Incentive (EII) Scheme and the CT exemption for new companies. More targeted announcements were made for tax reliefs available to the digital gaming sector, the aviation sector, for farmers, for independent brewers, and for certain equipment for hauliers. The lower VAT rate in place for the benefit of the hospitality industry will terminate in August 2022, and no changes to Capital Gains or Capital Acquisitions Taxes are proposed.
In recent months, considerable media coverage has been given to negotiations in relation to the OECD’s proposals for a minimum Corporation Tax rate. The Budget announcements confirmed the commitment made to sign up to the OECD plan for an agreed minimum Corporation Tax rate of 15%, however, the increased rate will only affect entities with an annual turnover exceeding €750m, while the existing 12.5% rate will continue to apply to all other entities. This confirmation will bring welcome certainty to all corporates, and means that the higher 15% tax rate will not affect SMEs.
Overall, the budget for 2022 did not include any major unexpected announcements. The Budget measures will result in Income Taxation reductions and Social Welfare increases.
Recent Budgets and supporting legislation have proposed annual Carbon Tax increases of €7.50 per tonne Carbon Tax for every year to 2030 – this planned increase is confirmed for 2022, along with some reasonably modest policy changes to VRT, an extension to allowances for the cost of energy efficient equipment, and to the €5,000 grant for the purchase of electric cars. These policy measures are intended to achieve material reductions in Irish carbon emissions, however, it remains to be seen if they will have a material impact or will come close to achieving the emissions targets committed to by the State.
Overall, the Budget for 2022 did not include any major unexpected announcements. The Budget measures will result in Income Taxation reductions and Social Welfare increases. It is hoped that the stability afforded will support continued growth as the economy emerges from COVID 19 pandemic restrictions and Brexit related disruption.
Our 2022 Full Budget Summary
Our full summary report is out!